Aust bonds weaker in quiet trade

THE Australian bond market is weaker as investors sit on the sidelines awaiting announcements from the Australian and US central banks.

UBS interest rate strategist Andrew Lilley said trading volumes on the Australian bond markets have been quite low on Monday.

That's ahead of Tuesday's release of the Reserve Bank of Australia's minutes of its June 4 board meeting, where it kept the cash rate unchanged at a record low of 2.75 per cent.

Traders are also waiting for the big event for financial markets this week - the outcome of US Federal Reserve policy meeting, due out on Thursday morning, Australian time.

After a recent batch of encouraging US economic data there has been talk that the Federal Open Market Committee (FOMC) might taper off its $US85 billion a month bond purchase program, designed to stimulate the American economy.

"After a little bit of a rally in the US on Friday night on fewer expectations that the Fed would be tapering at the next FOMC meeting, we actually had a relatively quiet open in the Aussie bond market," Mr Lilley said.

"Most participants will be waiting for the outcome of the RBA minutes on Tuesday and the outcome of the FOMC minutes on Wednesday night."

At 1630 AEST on Monday, the September 10-year bond futures contract was trading at 96.595 (implying a yield of 3.405 per cent), down from 97.635 (2.365 per cent) on Friday.

The September three-year bond futures contract was at 97.435 (2.565 per cent), down from 97.475 (2.525 per cent).